LONDON Oct 4 Turkey's lira fell to two-month
lows on Tuesday as the suspension of some 12,800 police
signalled a continuation of the government's crackdown after
July's failed coup, though global equity gains allowed emerging
shares to rise for a second day.
Strong U.S. manufacturing data supporter the dollar and took
a toll on emerging currencies overall, with markets now pricing
a U.S. interest rate rise in December. However, signs of
positive growth momentum in the world's largest economy boosted
emerging equities, which rose 0.4 percent.
But the impact of positive PMI data in many countries was
being offset by domestic politics within emerging markets while
there are fears of spillover from Britain, where plans to start
exiting European Union by March sent sterling to a three-decade
Political tensions have also resurfaced in Turkey where
authorities have extended an emergency period and continued
purging officials they say support dissident cleric Fethullah
Gulen. He denies masterminding the coup attempt.
"Emerging currencies were doing well for a while, driven by
the low-for-longer theme, re-flattening of (developed) yield
curves and energy prices being better supported. But now we have
some idiosyncratic stories linked to politics. That's why Turkey
is underperforming," said Unicredit strategist Kiran Kowshik.
He also noted Colombia's vote against a peace deal with
Marxist rebels and the breakdown on U.S.-Russia talks on Syria.
The lira and Turkish stocks slipped 0.3 percent against the
Emerging currencies were also hurt by the dollar which
surged almost half a percent against a basket of currencies
. The rand and rouble also weakened around 0.3 percent
In India, the rupee gained 0.2 percent against the dollar
after newly minted monetary policy committee delivered a
surprise 25-basis-point cut, with governor Urjit Patel presiding
over his first policy review since his appointment last month.
Stocks moved off recent one-month lows, rising 0.2
percent while the bank share index jumped almost 1
percent, shrugging off political woes amid tensions with
neighbouring Pakistan which had weighed on Indian assets in
recent days. Ten-year bond yields fell 3 bps to 6.75
percent to new seven-year low.
Polish and Hungarian stock markets tracked gains on Western
European bourses where shares in Deutsche Bank jumped 2.3
percent and a pan-European index rose almost 1 percent.
Currencies were flat however , showing
little reaction to Brexit jitters despite the region's links
with Britain for jobs and remittances.
Kowshik noted that while emerging assets had sold off after
the June 23 Brexit vote, they had subsequently benefited from
developed central banks' resolve to keep interest rates low.
"The important thing is whether the resulting uncertainty
from a hard Brexit makes central banks keep rates lower for
longer. If that view becomes dominant, we could, strangely
enough, see EM fixed income outperform," he added.
Emerging sovereign dollar bond yield spreads narrowed one
basis point to 332 bps over Treasuries, the narrowest in almost
For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 915.10 +3.49 +0.38 +15.23
Czech Rep 876.28 +7.69 +0.89 -8.37
Poland 1737.55 +12.11 +0.70 -6.54
Hungary 28399.37 +387.00 +1.38 +18.72
Romania 6949.68 -6.80 -0.10 -0.78
Greece 574.40 +4.68 +0.82 -9.02
Russia 1000.64 -4.05 -0.40 +32.18
South Africa 45445.68 +338.54 +0.75 -0.77
Turkey 77201.45 -23.94 -0.03 +7.63
China 3005.51 +7.03 +0.23 -15.08
India 28310.36 +67.07 +0.24 +8.40
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.00 27.00 +0.00 -0.01
Poland 4.30 4.29 -0.04 -0.88
Hungary 307.77 307.40 -0.12 +2.23
Romania 4.45 4.45 -0.10 +1.46
Serbia 123.00 122.93 -0.06 -1.24
Russia 62.48 62.32 -0.25 +16.76
Kazakhstan 333.50 334.56 +0.32 +2.10
Ukraine 25.80 25.88 +0.31 -7.16
South Africa 13.60 13.58 -0.12 +13.70
Kenya 101.15 101.10 -0.05 +1.04
Israel 3.76 3.76 -0.14 +3.29
Turkey 3.03 3.02 -0.29 -3.63
China 6.67 6.67 -0.00 -2.65
India 66.49 66.54 +0.08 -0.43
Brazil 3.21 3.21 +0.02 +23.41
Mexico 19.35 19.29 -0.34 -11.27
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 355 -1 .01 7 72.82 1
All data taken from Reuters at 08:39 GMT.
Currency percent change calculated from the daily U.S.
close at 2130 GMT.
(Additional reporting by Claire Milhench; Editing by Alison